Ownership incentives and housing affordability: Evidence from France

30 Pages Posted: 22 Mar 2021

See all articles by Sylvain Chareyron

Sylvain Chareyron

Université Paris-Est Créteil

Tidiane Ly

Institute of Economics (IdEP), Faculty of Economics, Università della Svizzera italiana

Yohann Trouvé-Sargison

University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE)

Date Written: March 20, 2021

Abstract

Are ownership incentive policies inevitably accompanied by detrimental inflationary effects?
To address this issue, we develop a theoretical model in which owners of new housing benefit from a homeownership subsidy or a rental investment incentive. We show that while both incentives increase the price of the new housing, they reduce old housing prices and have an ambiguous impact on the average housing price. These effects result from residential spillovers from the old housing market to the new housing market. We test these findings empirically by exploiting a 2014 French reform in the metropolitan area of Lyon which intensified both incentives. Difference-in-difference estimates confirm our theoretical predictions: two years after the reform, the price of new housing increased by 30% and the price of old housing decreased by 7%. Taking both markets together, the overall effect is non-significant. The share of new housing transactions increased by 25%.

Keywords: House prices, Interest-free loan policy, Rent ceiling, Difference-in-difference

JEL Classification: R14, R30, R31, R52

Suggested Citation

Chareyron, Sylvain and Ly, Tidiane and Trouvé-Sargison, Yohann, Ownership incentives and housing affordability: Evidence from France (March 20, 2021). Available at SSRN: https://ssrn.com/abstract=3808741 or http://dx.doi.org/10.2139/ssrn.3808741

Sylvain Chareyron

Université Paris-Est Créteil ( email )

France

Tidiane Ly (Contact Author)

Institute of Economics (IdEP), Faculty of Economics, Università della Svizzera italiana ( email )

Via Giuseppe Buffi 13
Lugano, 6900
Switzerland

Yohann Trouvé-Sargison

University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE) ( email )

Lyon
France

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